Clinton Hints China May Be Exempt From Iran Sanctions – One Day Before Data Show China Buying More Iranian Oil

Patrick Goodenough | June 22, 2012 | 4:28am EDT
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Tankers load oil in the northern Persian Gulf in 2004. (Photo: U.S. Navy/ Richard J. Brunson)

( – One day after Secretary of State Hillary Clinton hinted that China may be exempted from looming sanctions related to the Iranian oil trade, new customs data released Thursday showed that China’s imports of Iranian crude rose by more than one-third between April and May this year.

As the clock ticks down on the imposition of U.S. sanctions on foreign institutions that do business with Iran, Chinese customs data for May showed that while shipments of oil from Iran were down 2.3 percent from one year earlier, they had also climbed from 388,034 barrels per day (bpd) in April to 521,936 bpd a month later, an increase of 34.5 percent.

Clinton said Wednesday that China had “slowly but surely” been acting to reduce oil purchases from Iran, and that “based on the latest data,” it was moving in the right direction.

The decrease in Chinese imports from Iran until around March-April was tied to a contract dispute between China’s state-controlled Sinopec and Iran’s National Iranian Oil Co., rather than necessarily the result of Chinese attempts to reduce imports at the behest of the United States. The dispute was resolved towards the end of March, hence the increase again in Iranian imports since then.

Of the 10 biggest customers of Iranian oil, according to U.S. Energy Information Administration data for the first half of 2011, China is the only country that has yet to be granted a waiver by the Obama administration, ahead of new sanctions due to enter into force within days.

Under legislation designed in response to Iran’s suspected attempts to acquire nuclear weapons capability, the U.S. will after a June 28 deadline impose sanctions on foreign financial institutions that do business with Iran’s central bank, which deals with oil transactions.

Importers of Iranian oil that have made a clear effort to reduce their purchases “significantly” can be exempted, and since March Clinton has granted waivers to 18 countries determined to have done so, among them major customers Japan, India, South Korea and Italy.

As of now, China – Iran’s biggest oil customer, accounting for some 22 percent of the total in the first half of 2011 – remains eligible for the sanctions, but on Wednesday Clinton appeared to suggest that a waiver may be coming.

“I have to certify under American laws whether or not countries are reducing their purchases of crude oil from Iran,” she said during a joint event at the State Department with former Secretary of State James Baker, hosted by interviewer Charlie Rose. “And I was able to certify that India was, Japan was, South Korea was.”

“And we think, based on the latest data, that China is also moving in that direction,” Clinton added. “And thankfully, there’s been enough supply in the market that countries have been able to change suppliers.”

Clinton characterized China as cooperative in international efforts to resolve the Iranian standoff.

“One of the real successes of our diplomatic strategy toward Iran, which was to be willing to engage with them but to keep a very clear pressure track going, is that the Chinese and the Russians are part of a unified negotiating stance that we have presented to the Iranians, most recently [at so-called P5+1 talks] in Moscow,” she said.

“So I think it took three-plus years, because one of the efforts that we’ve been engaged in is to make the case that as difficult as it is to put these sanctions on Iran – and particularly to ask countries like China to decrease their crude oil purchases from Iran – the alternatives are much worse.

“And we’ve seen China slowly but surely take actions, along with some other countries for whom it was quite difficult – Japan, South Korea, India, etcetera. So on Iran, they are very much with us in the international arena,” Clinton said.

Proof of significant reduction of Iranian oil imports is not the only way a country can get a waiver from the imminent sanctions. The legislation also allows the president to waive the penalties based on national security considerations.

The customs data did show that China has increased imports of oil from suppliers other than Iran over the year from May 2011 to May 2012. Purchases from Saudi Arabia were up 12.4 percent over that period, those from Angola up 40 percent and those from Iraq up 64 percent.

At the same time, shipments from Saudi Arabia, the biggest supplier, also dropped slightly between April and May this year – the same period that China’s imports from Iran rose again by 34.5 percent, following the resolution of the Sinopec-National Iranian Oil Co. dispute.

Chinese foreign ministry spokesman Hong Lei told a briefing Thursday that import of Iranian oil was based on China’s “own economic development needs” and was “fully reasonable and legitimate.”

“China’s imports do not undermine the interests of a third party, nor do they go against any relevant U.N. Security Council resolutions,” Hong said.

Beijing has long objected to unilateral sanctions – those imposed outside the domain of the Security Council – against any country for any reason.

The beginning of July also marks the advent of a European Union embargo on Iranian crude oil. The measures include a ban on E.U. insurance firms providing coverage for tankers carrying Iranian oil.

Together, the 13 members of a body called the International Group of P&I Clubs provide liability cover for approximately 90 percent of the world’s ocean-going cargoes. Since P&I is based in London, this means the vast majority of the world’s tankers would be affected by the E.U. ban.

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